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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London close: Stocks mixed as gold rises ahead of Easter after Trump says US dollar overvalued Equities in London ended Thursday mixed, ahead of the Easter weekend, as investors headed for safe-haven assets after US President Donald Trump said the dollar was over valued.
Trump said the greenback was too strong. "That's hurting that will hurt ultimately," he told the Wall St Journal. He also wanted interest rates low.
His words followed Fed Reserve chair Janet Yellen having stated earlier in the week that a neutral stance on US monetary policy was appropriate.
In London, the FTSE 100 fell 0.29% to end the day and week at 7,327.59, and the FTSE 250 was up 0.52% to 19,525.33. At 16:45 GMT, Wall St was mildly higher. Europe was modestly lower.
Global markets remain awash with geopolitical concerns these centred on the US and North Korea, the US and Russia over Syria, Brexit, and France's presidential election.
"In a week where Donald Trump has been seemingly fighting pushing back against both the Russia-Syria and China-North Korea relationships, there is no wonder we have seen geopolitical fears dominate the agenda," said IG market analyst Joshua Mahony.
"With the long weekend ahead in the UK, there is certainly an element of position unwinding given the unwillingness of traders to hold anything going into the weekend," said Mahony.
Data out of China earlier showed exports rose the most in two years in March, as imports moderated from a spike the month before.
Meanwhile, the Royal Institution of Chartered Surveyors' headline house-price balance for March was at 22% and in keeping with expectations.
Among the FTSE 100 equities on the move on Thursday, Standard Life, Reckitt Benckiser and Taylor Wimpey all appeared on a longish list of stocks going ex-dividend.
Generally speaking, US interest rates-sensitive banks did poorly with HSBC, Standard Chartered, Royal Bank of Scotland and Barclays down.
Hargreaves Lansdown equity analyst Nicholas Hyett said trying to pin down exactly what was moving banking shares was always a challenge in a globally-connected market.
"However, the Bank of England's Credit Conditions Review released this morning, is unlikely to be helping UK banks. It showed a slowdown in the growth of business lending and, perhaps more importantly, a decline in availability of unsecured consumer credit."
Oil majors Royal Dutch Shell and BP lost ground, as did a number of multi-commodity miners after Rio Tinto. Gold specialists like Randgold Resources and Fresnillo did well as investors bought safe-haven gold.
In the news, healthcare group Mediclinic International gained as its two largest platforms, Switzerland and Southern Africa, in addition to its Dubai business, all performed in line with expectations during the 2017 financial year.
Royal Mail shares rose after it announced it would shut its defined benefit pension scheme in 2018, saying there was no affordable solution to keep the plan open in its current form.
Hargreaves Lansdown has appointed Christopher Hill as chief executive, effective from today.
Associated British Foods got a boost as Jefferies upped the stock to 'buy' from 'hold'. |
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| Market Movers
FTSE 100 (UKX) 7,327.59 -0.29%
FTSE 250 (MCX) 19,525.33 0.52%
techMARK (TASX) 3,469.73 0.09%
FTSE 100 - Risers
Associated British Foods (ABF) 2,709.00p 3.59%
Mediclinic International (MDC) 759.00p 3.05%
Micro Focus International (MCRO) 2,532.00p 2.26%
Sage Group (SGE) 663.50p 2.08%
Persimmon (PSN) 2,221.00p 1.55%
Fresnillo (FRES) 1,641.00p 1.55%
Barratt Developments (BDEV) 572.00p 1.51%
Randgold Resources Ltd. (RRS) 7,535.00p 1.48%
Whitbread (WTB) 4,175.00p 1.33%
Old Mutual (OML) 195.10p 1.30%
FTSE 100 - Fallers
Standard Life (SL.) 368.70p -2.36%
HSBC Holdings (HSBA) 643.90p -1.74%
Standard Chartered (STAN) 709.50p -1.65%
Tesco (TSCO) 181.50p -1.57%
Ashtead Group (AHT) 1,652.00p -1.55%
CRH (CRH) 2,701.00p -1.53%
Centrica (CNA) 216.30p -1.41%
Royal Dutch Shell 'B' (RDSB) 2,192.50p -1.35%
Royal Bank of Scotland Group (RBS) 228.40p -1.30%
Royal Dutch Shell 'A' (RDSA) 2,106.50p -1.15%
FTSE 250 - Risers
Pets at Home Group (PETS) 188.70p 5.66%
Acacia Mining (ACA) 493.80p 5.20%
Centamin (DI) (CEY) 190.50p 5.07%
Ibstock (IBST) 216.30p 4.34%
Lancashire Holdings Limited (LRE) 679.00p 4.22%
Ocado Group (OCDO) 247.00p 3.52%
Pagegroup (PAGE) 491.40p 3.37%
Bovis Homes Group (BVS) 911.50p 3.23%
PZ Cussons (PZC) 339.60p 3.07%
Grafton Group Units (GFTU) 741.00p 2.92%
FTSE 250 - Fallers
AO World (AO.) 137.00p -4.33%
esure Group (ESUR) 240.70p -2.90%
PayPoint (PAY) 1,059.00p -2.67%
CLS Holdings (CLI) 1,940.00p -2.46%
Ferrexpo (FXPO) 155.00p -2.45%
Savills (SVS) 929.00p -2.11%
Tullow Oil (TLW) 228.50p -1.89%
Essentra (ESNT) 519.50p -1.89%
Bodycote (BOY) 825.00p -1.37% |
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| | US Market Report | | US open: Trump trips up traders trying to hedge their risk Wall Street's main equity gauges turned higher following a weak start to the day, with what few remaining traders there were focused on hedging their risk ahead of the long holiday weekend - the US president permitting.
As of 1609 GMT the Dow Jones Industrials was edging higher by 0.02% or 4.16 points at 20,596.90, while the S&P 500 was gaining 0.09% to 2,347.19 and the Nasdaq Composite was ahead by 0.30% to 5,853.40.
In parallel, the VIX volatility index was off by 3.04% to 15.29, having touched an intra-day high of 16.22.
"Traders are more focused towards hedging their positions, than anything else. If you look at the VIX index, the recent spike tells you one, and one thing only; investors are taking advantage of cheap volatility index to hedge their risk," said Naeem Aslam, chief market analyst at Think Markets.
From a sector standpoint, the best performance was coming from: Home construction (0.98%), Business training (0.95%) and Multiutilities (0.79%).
The KBW Bank index was up by 0.40%.
The Trump Factor
Making traders' task that much harder, overnight US president Donald Trump threw global markets a 'curve ball', telling the Journal the greenback was getting too strong and that he did like a low interest rate policy.
He told The Wall Street Journal: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting - that will hurt ultimately."
He added: "It's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency."
His comments had sent US 10-year Treasury note yields down by eight basis points to 2.22% early in London trading, and had the knock-on effect of sending the dollar index down by 0.5% in less than 15 minutes immediately after.
Yet by the afternoon in London those yields were bouncing back to 2.25%.
Commenting on the US president's remarks, Aslam said: "Many in the market are focused on weakness in the dollar which was hit hard after Trump's comments.
"[...] Trump wants to keep the interest rate lower, this would aid in gaining some competitive edge in trade relations with other countries. Finally, Trump's mammoth infrastructure plan would be fueled by debt and lower interest rates would be an ideal situation."
Aslam neverthless also said that Trump had in effect also given his blessing to a second term for Fed chief Janet Yellen.
At the same time, geopolitical concerns continued to rattle investors amid mounting fears of a new weapons test by North Korea as a US carrier group sails towards the area.
Underlining those concerns, on Thursday China's foreign minister warned against either side resorting to force to solve the current impasse on the Korean peninsula.
Banks mostly higher
Solid results from JP Morgan Chase and Citi have been greeted with gains in their share prices, partially offset by losses in Wells Fargo stock.
JP Morgan's first quarter financials blew past the Street's forecasts thanks to robust trading at its Corporate and Investment Banking arm. Net revenues were 6% ahead on the first quarter of 2016 at $25.6bn (consensus: $24.9bn), driven by loan growth and higher interest rates, alongside a 17% jump in profits after tax to $6.448bn.
Heightened trading activity as the interest rate cycle in the US turns boosted Citi's revenues and profits well past analysts' forecasts during the first quarter of 2017. Citi posted top-line growth of 3% in comparison to the year ago period to reach $18.12bn, versus the $17.76bn seen by the analyst consensus. |
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| | Broker Tips | | Broker tips: Associated British Foods, Ascential, BP Shares in Associated British Foods were given a boost by an upgrade from Jefferies to a 'buy' recommendation on the back of continued strength in its sugar business and an expected upturn in margins from its Primark retail arm.
The investment bank, which upped its target to 3,100p from 2,450p, said interim results next Wednesday should confirm strong results with sales up 18% and earnings per share up 28% thanks to currency effects and a sugar rebound.
While expecting minimal Primark progress in the first half, Jefferies felt the key focus will be on Primark's future margin trajectory and itself forecast that by the 2018/19 financial year the fast fashion chain will enjoy an improvement of 100 basis points to 10.4% from the 9.4% trough in the current year.
"Evidence of price recovery is starting to come through in Germany, and we expect this to extend to the UK by Autumn/Winter 2017. Our proprietary pricing shows remarkable price discipline at Primark UK despite the pain from six-month sourcing lead times."
For sugar, analyst James Grzinic assumed up to £200m of operating profit can be defended post the quota removal in September 2017, as the slump in sterling has severely dented the competitiveness of French imports in the UK.
The analysts also suggested bumper year-end cash levels would support "as much as £3bn of M&A firepower" to boost future earnings, based on management's impressive recent track-record on M&A value creation.
Grzinic said Primark's valuation attractions were emerging, with calendar 2018 price/earnings ratio of less than 22 compared to the peak of around 40 times in late 2015, while its shares had a relative discount of circa 10% in the staples sector was close to the trough of the past five years.
Ascential
Goldman Sachs reiterated a Conviction List 'buy' rating on Ascential as it expects its growth to continue with acquisitions, disposals and new product launches.
The business-to-business media company could return 25% to investors as its business mix has improved "significantly" since it floated last February and with the acquisitions of MediaLink and OneClick Retail and the planned sale of its 'heritage brands, GS said. This would drive organic growth up by 100 basis points and earnings before interest tax depreciation and amortisation (EBITDA) margins by 150 basis points.
The bank said that profitability will stall in 2017 due to the planned investments, but these initiatives could set the stage for future growth.
On top of this, Goldman expects continued deployment of cash in mergers and acquisition activity to add 2-3% per year to EBITDA.
Goldman's 2017/18 financial year EBITDA estimates declined 3.8%/3.1% due to planned investment in new products and its 12 month price target of 398p from 402p, remains 70% based on 16.5 times the 2018 price-earnings ratio and 30% based on a merger and acquisition value of 470p, reflecting historic transaction multiples.
The stock trades on about 14 times the 2018 price-earnings ratio and an 11% free cash flow yield which Goldman sees as attractive against the EU media sector, which is on 16 times the price-earnings ratio, with a free cash flow yield of 6.5%.
BP
'Keep it simple', analysts at Barclays advised investors in BP shares, highlighting how if the dividend was sustainable then the yield on offer was 7.0% and pointing to a number of projects which were expected to start up in the second half of 2017.
In their view, 2016 was one of implementing change and preparing the company for a period of sustained growth.
Last year, BP reduced upstream costs by 17% and cut its headcount back down to 2005/06 levels, the broker said.
It also replaced its reserves for the first time since 2013.
The ADCO concession helped BP in that but it nonetheless does support the company's target of 5% production growth out to 2021.
Barclays reiterated its 'overweight' stance and 625p target for the shares. | | | | To advertise in the Euro Markets Bulletin please contact [email protected] |
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